The Charge Card Renaissance
By: Brian O'Connell

If you’re under 35, chances are you’ve never heard the term “charge card” pass anyone’s lips, save for your fuddy-duddy, lame-o parents. But get ready, because you’ll be hearing the term a lot more going forward. That’s because it’s charge cards, and not credit cards, that are gaining higher visibility these days. What’s a charge card? And how does it differ from a credit card? Here are the ropes.

First, some emerging facts. According to The Wall Street Journal (Stock Quote: WSJ) charge card use now accounts for 8% of all credit cards — up from 2% a few years ago.

Why the sudden surge in charge cards? It’s all about consumers wanting to put a lid on debt. Charge cards, unlike credit cards, demand a “balance due” each month. In addition, there’s no such thing as a minimum payment. The only payment allowed is for the full amount of the monthly debt. If you’re late, expect significant fees and penalties. And if you’re late more than once, expect to have your card suspended or canceled out right.

The good news is that there are no interest payments (charge card issuers make their money on annual fees and a percentage of the retail transaction every time the card is used.)

Other advantages of charge cards:

Credit score growth — Charge cards can help your credit score, but only if you always pay your monthly bill. By having to pay the full amount every month, it helps build a stronger credit score. No revolving debt = better credit.

Help for small businesses — Charge cards are popular with business owners because they act like a line of credit. Any time he or she needs to, a small business owner can dip into his or her card reserves to get some quick cash.

Stronger protection — Historically, charge cards offer greater protection on things like return policies and defective merchandise, when compared to credit and (especially) debit cards.

To get a charge card, you will need a good credit score. American Express (Stock Quote: AXP), the industry leader in charge cards, typically markets its cards to consumers with credit scores of 760 or better,

Watch for fees, too. Annual charge card fees are all over the board, with some cards costing as low as $25 and others up to $400 or more. And, if you pay late, fees of up to 3% of your total balance may come into play.

The long and short of it? With charge cards, you’re basically dealing with a short-term loan. That’s a big difference from credit cards, which are built around the theme of revolving debt.

In times of economic peril, having access to credit, with the responsibility of paying it off within 30 days, might not be such a bad thing for card customers.

— For more ways to save, spend, invest and borrow, visit

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